Good morning, ladies and gentlemen, and welcome to Cholamandalam Investment and Finance Company Limited Q2 FY23 earnings conference call hosted by Kotak Securities. As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star then zero on your touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Nischint Chawathe from Kotak Securities. Thank you. Over to you, Mr. Nischint. Thanks, Michelle. Good morning, everyone. Welcome to the earnings conference call of Cholamandalam Investment and Finance Company Limited. To discuss the 2Q FY23 performance of Chola and share industry and business updates, we have the senior management represented by Mr. Vellayan Subbiah, Chairman and Non-Executive Director, Mr. Ravindra Kumar Kundu, Executive Director, and Mr. D. Arul selvan, President and CFO. I would now like to hand over the call to Vellayan for his opening comments, after which we can take the Q&As. Thank you, Nischint, and good morning, everybody. Just a quick update on the quarter and then we'll get into you know, individual businesses. Disbursements for the quarter was at INR 14,600 crores, which was up by 68%. For the half year, we've been at INR 27,900 crores, which is up by 126%. Total AUM is now at INR 91,841 crores, which is up by 22%. Our net interest income is at INR 1,697 crores for the quarter, which is up 21% year-on-year, and INR 3,337 crores for the half year, which is up 20% year-on-year. The PAT is at INR 5,663 crores for the quarter, which is down by 7%. We'll talk a bit more about that. INR 1,129 crores for the half year, which is up by 21%. Broadly, the macro environment, you know, continues to look at, you know, interest rate hikes in response to high inflation. you know, there's all of this question around the global recession coming up. you know, in general, India seems to be in a good place, relatively. you know, obviously we're just kind of a bit dependent on kind of seeing what happens with global factors. Otherwise, when we look at Chola's performance, we've achieved our highest quarterly disbursements, which has really become possible because of our diversified product mix. Right? Basically, a lot of the new businesses we talked about, the growth in housing loans, loan against property, all of that is basically helping this. This will really help us sustain the momentum moving into the festival season ahead. Just a quick commentary on the profit number. Like we said, we were down by 7%. Basically, it's driven by what happened last year in Q2. Last year in Q1, we were impacted by the COVID second wave, and therefore we had huge forward flows into higher buckets and higher provisioning. Post-release of lockdowns in Q2, we were basically able to roll back a lot. Basically they moved into higher buckets in Q1. They moved into higher buckets in Q1. Therefore, you know, Q1 of FY 2022 had higher credit loss provisioning at over 3%, an ECL of INR 563 crore. Q2 resulted in just 0.37% and ECL of INR 69 crore, which is what basically caused our profit in Q2 to be, I would say a bit abnormally high. Which is why we look at the PAT for the first half of the year, we're at INR 1,129 crore, which is basically up by 21% year-on-year. I'll just give you some details in individual businesses. We said aggregate disbursements grew by 68%. Vehicle finance disbursements were at INR 8,502 crore for the quarter, which is a growth of 38%. Loan Against Property disbursed INR 2,246 crore, which is a growth of 38% again. Home loans basically disbursed INR 743 crore, which is a growth of 23%. SME business disbursed INR 1,473 crore, which is a growth of 367%. This is a consumer and small enterprise loan business disbursed INR 1,579 crore for the quarter. Secured business and personal loans was at INR 81 crore, and that's what resulted in then helping build the book to INR 91,000 crore, INR 91,841 crore. PBT ROA was at 3.4% for the quarter and 3.5% for the half year. ROE was at 18.3%. We continue to hold strong liquidity, INR 4,841 crores of the cash balance, and a total liquidity position of INR 6,573 crores. ALM is comfortable with no negative cumulative mismatches across all time buckets. With that, we've talked about asset quality also, so I'll just kind of briefly allude to that. At the end of September 2022, our stage three assets stood at 3.84%, versus 4.16% at the end of June 2022. We've come down by you know about 0.32%. Our provision coverage went up to 41.48% versus 40.69%. The total provisions currently carried against the overall book is at 2.73%, as against the normal provision levels of 1.75% that were carried prior to the COVID-19 pandemic. As per revised RBI norms, GNPA and NNPA as of September 2022 stood at 5.84% and 3.99% respectively. We carry INR 771 crore higher provisions under Ind AS over IRAC. As per prevailing IRAC norms, the GNPA will be similar to the stage three numbers we just gave you. Capital adequacy was at 18.4% as against the regulatory requirement of 15%. Tier one capital is at 15.77%. Let me stop with that and be happy to take it over. All of us are here, and we're happy to take it over for questions. Thank you very much. We will now begin the question-and-answer session. Anyone who wishes to ask a question may press star and one on their touchtone phone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. Ladies and gentlemen, in order to ensure that the management will be able to answer questions from all participants, please limit your questions to two per participant. Should you have a follow-up question, please rejoin the queue. Thank you. The first question is from the line of Rajesh from Alpha Accurate Advisors Private Limited. Please go ahead. Good morning, sir. You know, thanks for the opportunity. Sir, I have just two questions. The first is, you know, if you can give color on the yield on loans, which has declined about 75 basis points year-over-year, and of course, the cost of funding is up 13 basis points, so this leads to 88 basis points, you know, lower spread. Can you give your near-term, how do you see that? And next year, how do you see the same? That's first question. Second question is with reference to the operating expenses, which is up about 28% year-over-year. How do you see, you know, this number and the cost-to-AUM ratio in the near-term and in the FY 2024? Thank you. Sorry, Aruls elvan here. Yeah. The yield has moved from 13.7% - 13.5% as compared to last year. This is primarily because we are again comparing the previous year. Actually, the yield in the Q3, Q4 had dropped further because of the prevailing you know, benign interest rate scenario at that point in time. From there, it has actually moved up if you compare the Q3, Q4 numbers, which is what we are now doing at Q1, Q2. The cost of funds on a year-on-year basis is still lower than last year. That's what you are seeing here from 6% to still at 5.8%. While Q1 versus Q2, it has moved up. The expectation on cost of funds increase over the full year would be around 50, 60 basis points on a year-on-year comparison. What I have said in the last call also, and we still hold to that. While we would be improving the yield by way of increasing the yield on the floating rate books, which is our LAP and HL book, on the entire book, and for the vehicle finance book, being a fixed rate book, we would be increasing it on the marginal yield on the first disbursement. We'll see yield improvements happening progressively as we move into the subsequent quarters. Regarding your OpEx question, I think we still hold that we would be in the 3% to average assets ratio. We will endeavor to keep it at that or slightly below that level. You know, basically, when I look at FY 2024, the net yield, you know, how do you see the yield, you know, as we move forward, particularly in FY 2024? Same question for, you know, whether one should look at operating expenses in absolute terms, in FY 2024, should we expect about, you know, 10%-12% kind of a growth? Or you think because of the lot of new business development, it can be higher? The yield will be a factor of the product mix. As you know, the strength of Chola is we have a wide product mix, even within each of the product categories we handle, which is vehicle finance, LAP, or other products. Now, that would primarily be driven by which products we focus on depending on the demand in the geographies we operate in. It is very difficult to say that, will it be exactly what would be the FY 2024 number right now on yield, NIM, et cetera. The way we operate is to have that product mix done in such a way that the ROTA of 3.5% pre-tax is delivered irrespective of wherever we are on the yield line or the cost of fund line or on OpEx line. While we will have— when we do a higher yield product, the OpEx will be larger because these will be of small ticket, like say for example, two-wheeler loan or, you know, the new businesses which is like mercy sale, et cetera. But then the yield compensates for the higher OpEx. Individual line items will keep varying based on product mix. I would rather request that the focus be on the ROTA, which would be what we will continue to deliver in the 3.5% ROA levels pre-tax. Just to give you the yield trajectory for last few quarter, Q2 last year we were actually for the marginal book, we achieved 13.77%, and then Q4 it went down to 13.38% for the entire CFCL book. Now in Q1 it has gone up to 13.73%. In Q2 it has gone up to 14.25%. From the lowest bottom of 13.38%, our marginal book yield in the Q2 has gone up almost closer to 80 basis points. In addition to that, we have also done a rate revision for our home loan and loan against properties, and that is going on. That is also impacting improvement in the book yield. In the current year, if you see that from the Q2 last year in the Vehicle Finance, the new vehicle sales have picked up and that is also a reason for, you know, we have to participate in the market. Say Q1 of last year Q2, the used component was high. The marginal book yield was higher. In spite of that, we have been successful in, you know, increasing the rates of the marginal book. My question on operating expense on an absolute basis, how should one look at it for FY 2024? No, actually we cannot tell on the absolute basis. We are giving you on the average asset basis. I told that it will be at less than 3% or 3%-3% level. We stick to that. Thank you, sir. Thank you. Wish you all the best. Thank you. Thank you. We have the next question from the line of Rikin Shah from Credit Suisse. Please go ahead. Hi, good morning, sir, and thanks for the opportunity. Just had one question. The disbursements for the new businesses has moved to the quarterly run rate of INR 3,000 crore. You know, probably even ahead of what was kind of guided earlier. As these new products keep getting rolled out to the existing branches, would you be comfortable sharing your growth guidance or what proportion of this new businesses will contribute to the total books at around 5% in medium term? We have reached to 5% now. Yes [crosstalk]. That is on the AUM level. 5% is the, you know, total size of this new vehicle, new businesses, three businesses, which is CSEL, SME and SBPL. Obviously it will go up. Just to give you the direction of vehicle finance, how it is happening in terms of disbursement for the last few quarters, four, five quarters. Vehicle finance in Q1, the mix of the disbursement was 78%. In Q2 it came down to, you know, 71%, and Q4 69% and Q1 it is 64% and Q2 it is 68%. Obviously the disbursement mix of the vehicle finance is coming down in spite of vehicle finance is also growing at the rate of, say, 38% in quarter two and overall growth has been 89% for the half year. All the divisions are trying to basically grow their disbursements depending upon the market conditions and portfolio behavior. Obviously the new businesses will take a little more share as they go ahead and expand their, you know, operations because they are also finding out, you know, success in their last one year operations. Obviously they are confident and, you know, quite committed to grow the rest of the branches as well. Sure. Any number that you would probably point to in terms of where 10% of AUM could settle in next two years? As of now we are not giving any number. I mean, we have to just wait another 1 year so we start giving the numbers because these are basically very fluid in terms of the disbursements. Obviously, directionally, the new business mix is going up. Understood. Okay. Thank you. That's all from my end. Thank you. We have the next question from the line of Dhaval from DSP Mutual Fund. Please go ahead. Yeah, hi. Thanks for the opportunity. Just had one question relating to the new business. So could you split the disbursement between CSEL, SBPL and SME and also give some perspective around what percentage of the CSEL book is via partnership channel? Just one more follow-up on that is how do you see the rundown of the new businesses? Since right now we are in the buildup phase. The runoff rate seems to be relatively low. If you could give your expectation, that would be useful. Thanks. Yeah. If you see that, in Q2, the quarter we ended now, we have done the disbursement in terms of SME is INR 1,473 crore and INR 81 crore came from secured business and personal loan. CSEL had two channels. One is the traditional channel where they have done INR 1,108 crore and partnership channel gave INR 471 crore. This partnership channel INR 471 crore it has got higher runoff. Rest of the, you know, volumes are in normal runoff. Understood. Sir, directionally, how do you see the runoff rate on the new business portfolio? Should it be around the current level or you would expect this to move much higher, especially in the consumer and SME. No, no, it will be in the same level because our partnership book, which is the small ticket size, short-term, PM is actually smaller. 1/3 [crosstalk]. Actually one third of the overall loan. Therefore that is not going to change anything. Also we are growing in the home loan and affordable housing, affordable home loan and also loan against property, which is a longer term loan. Okay. The MSME has got some amount of bill discounting which will be again one third of that, which will again run down faster. Rest of the books will perform. Normally. In line with the similar rundowns like Vehicle Finance for. Understood. Just one more broader level question in terms of growth. Do you see, you know, this momentum that we see in second quarter sort of continuing for, you know, not just FY 2023 but into FY 2024 as well? Given the contribution of new business will materially go up from the current level, do you see a 25% kind of trajectory even in FY 2024 likely? It all depend on macro and even the India is highly depending on monsoon. Monsoon has been better, although it has been uneven. Second half is going to be better. For the second half we can actually expect better disbursement than what we have been disbursing so far in terms of absolute value. Obviously we will be growing and as of now our growth has been 22%-32%, which can go up to even 25% in this financial year. If next year things are remaining as it is, then we will continue this momentum. For the next year we have to see the industry also having a, you know, higher base. That's the reason we don't want to give any kind of, you know, forward-looking statement for the next financial year. As of now for the— as we stand here, this year is looking very good. Yes. Got it, sir. Thank you and all the best. Thank you. Thank you. We have the next question from the line of Darpin Shah from Haitong India. Please go ahead. Yeah. Thanks for the opportunity. My first question is to Arul selvan. So the floating rate book is home loan and LAP. We have not seen any kind of repricing. Mr. Shah, sorry to interrupt. I would request you to speak little bit farther from your mic because we can hear the disturbance along with your voice. Is this better? Yes, please proceed. Yeah, sorry about it. Yeah. Arul sir, you know, in terms of the floating rate book, you know, as home loans and home equity, you know, we have not seen any kind of a yield revision in this quarter. How do you explain that? We have increased the floating rate on our LAP book by 40 basis points in June and 40 basis points in September and we'll be doing another 40 basis points in November. You would only see, you would have most probably seen only the first 40 basis points in impact in Q2, which you may not see. You will only see as we move into Q3, the impact of the second 40 and then one in Q4, the third 40. We have been doing this increase in a staggered manner so that we also wanted to assess the impact of the pre-closures and how the market and the industry is behaving. We are pleasantly surprised that the foreclosures have not been actually, you know, as we expected it to be. The way the market has increased the rates like more than 150 basis points in one shot. I think we have been more, you know, kind to the customers, right? If I may say so, in taking it in a staggered manner. The same applies for HL. We have done those changes. You'll see them progressively coming in. Okay. Sir, you know, in the 40 basis points increase in June, we are not seeing any impact on the overall yields for second quarter as well because the reported numbers suggest that, you know, the yields are stable at 11.7% for home equity. Yeah. That is also to some extent will be driven by the new disbursement that would have happened in the Q1 and Q4 of last year and Q1 of this year. Whereas we were talking earlier, the same principle applies because in those periods the interest rate was benign and the cost of funds was benign. We had also scaled down our lending rate. To that extent it is offsetting the increase that you might be seeing here. In fact we [crosstalk]. Start [crosstalk] in the next [crosstalk] quarter. Next quarter you'll see the results. Okay. Sir, in terms of provisioning, any additional macro-related provisions you have done this quarter? We have not increased the management overlay. We have held it there because actually we don't see as you can see our NPA numbers are coming down. Environment is more stable from the incremental or unexpected loss perspective. We have not either increased it nor have we consumed it. We will evaluate it as we go on into the next two quarters and take a call over, maybe at the end of this financial year or around that time. Okay. Lastly, Kundu sir, you know, how are we seeing things on ground, you know? We are hearing that, you know, the numbers have been relatively slower in the month of October. Your thoughts on, especially on the vehicle finance side. No, no. October has been one of the biggest month in the history for Chola as of now and for the industry also for that matter. The passenger car, pickup, two-wheeler, three-wheeler pickup. You know, tractor has also gone up. And commercial vehicle has been growing in a rapid speed. October we have disbursed highest so far. Market is looking better. Yeah, there are some pockets in the market where there are some issues are there related to mining or construction, but at overall level, things are looking better. In a specific market, there are some problems with that, but that we need to consider the part and parcel of the business. Agreed. Great. Thanks. Thanks for this and all the best, sir. Thank you. Thank you. Ladies and gentlemen, I would request all the participants to limit their questions to one per participant. Should you have a follow-up question, please rejoin the queue. Thank you. The next question is from the line of Shweta Daptardar from Elara Capital. Please go ahead. Thank you, sir, for the opportunity. You just made a fleeting mention of management overlay being held up, almost, you know, with marginal increase quarter-on-quarter. Against that backdrop, even if I look at ECL coverage, that is also seem to be normalizing. Like we saw 1.59% vis-à-vis 1.58%, you know, in March 2020 quarter. Do we see now declining trends in terms of coverage and credit cost going forward, you know, factoring in the worst is behind? I also remember last quarter you mentioning not much of stress on the restructured pool side that stands meager. Can you throw some color there? Yeah. See, as you could see that our NPA numbers, even in absolute terms, as well as percentage terms, are coming down, both in stage two and stage three. If you go pre-COVID, if you remove the management overlay and look at it pre-COVID, our average provision requirement or provision coverage is in the range of around 30%-32%. That's what is expected. While we may not go down to all that level, at least, from the perspective what we are seeing today, we will certainly not be increasing the management overlay because certainly we don't see that requirement coming up. However, regulations are keeping on changing. Market is very dynamic, so we want to wait for the next one or two quarters before taking a call on how to utilize this management overlay in the coming quarters. Okay. Just a related question. You also mentioned that, you know, your stage two is declining. So that is also rightly reflected in stage 2 B, which is also declining. So any vulnerability left there, you know, both on stage 1 B and stage 2 B, in terms of repayments and, you know, one or two EMIs or more EMIs coming through now? See, the stage 2 B and stage 1 B are a representation of what the new RBI norms is wanting us to do with regard to, I mean, declaring them as part of NPA under IRAC norms. From an ECL perspective, we are showing them a separate category because they are already showing trends of improvement. They had touched NPA sometime in the past, and there have been collections of their outstandings which have made them move into stage 2 B and stage 1 B, which means they are progressively moving towards becoming a zero delinquent program. But till that time they become zero, we need to categorize them in these two categories, and that's what is being presented. The overall NPA number is stage 1 B, 2 B, and stage three put together is what we will be declaring to RBI. Actually, that we have early adopted this as against many others in the industry who are yet to adopt this, which becomes effective from first October. This is a good trend only, if the 2 Bs and 1 Bs are, you know, coming down and that is, that means they are moving out and becoming standard. Sure. That was pretty helpful. Thank you, sir. Thank you. Thank you. We have the next question from the line of Shubhranshu Mishra from PhillipCapital. Please go ahead. Hi, sir. Good morning. Thank you for the opportunity. The first question is on the employees. We have increased almost, you know, 12,000 odd employees over the last two odd years. Just wanted to understand where they are deployed. How many into the new businesses and how many into collections, sales, so on and so forth. Also if you can give the collection architecture, how many on-roll employees are deployed into collections across verticals, if you can split that out. If we have any collection agencies also doing our collections. Thanks. Shubhranshu, actually this is too much of details that we generally would not want to share. Broadly, I will give you, almost like one-third of our, you know, total population working for us is on-roll and two-thirds would be off-roll. I would say that, again, half of that would be in collection and half of it would be in the rest of the other activities at a very broad level. Your question on collection agencies, we don't engage collection agencies. We do use some of them to coordinate with RTO office or the police, et cetera, for, you know, and parking yards, et cetera. Most of our collections are done by our in-house team. Understood, sir. Given the fact that you didn't really answer my entire question, if I can just ask one last question. What is our active number of customers? You have given the total customer pool, but how many do we bank on a monthly basis? 21 lakh customers are active across all businesses put together. Right. Thank you. Thank you. We have the next question from the line of Piran Engineer from CLSA. Please go ahead. Yeah. Hi, congrats on the quarter. Before I get to my question, on slide 14, in the pie chart for home loans, what is the 10% AL? What does AL mean? Affordable. Affordable LAP. Affordable LAP. It's a variant of the home loan. This is more like a LAP loan given to customer profiles which fit the home loan profile. Which is like a very small business guy who is taking a loan against an existing property. Now, since the home loan team addresses this segment of customers, we have grouped it under that. Okay. Got it. Just getting to my initial question and sort of overlapping with the previous guy. In the last two quarters, we've added 5,000 employees, but no proportionate increase in branch count. That's been largely stable. Just wanted to get a sense of, you know, so are we, you know, adding more manpower to the same branches? Also in the future, do we expect more branch openings in the next few quarters or this is where it sort of stabilizes? Because your peers are also around 1,200-1,300 branches, so is that the saturation point in vehicle finance so to speak? The overall count has gone up because we are adding manpower in the new businesses, and new businesses are all co-located in the Vehicle Finance branches. That's the reason Vehicle Finance branch count is actually not going up and therefore there is a difference between what you are seeing. Otherwise, the headcount has gone up mainly because of the new businesses. Now, in addition to that, we have also opened up around 500 resident locations, which doesn't have as of now the physical branch, and which will be getting converted into the branch as and when they start hitting the target volume. That is also where the Vehicle Finance has actually increased the footprint and also increased the manpower. These are the two heading, one is the Vehicle Finance rural location and second is the new businesses which are expanded into the Vehicle Finance branches. Got it. These are mini branches, resident locations? Yeah. Okay. Satellite branch you can say that. It's not a physical branch. It is a person operating from a certain location to assess the market and look at a few, you know, agreements being captured. Once we are confident about that location, then we open a branch. Awesome. Okay. Thank you. I'll get back in the queue. All the best. Thank you. A reminder to the participants to limit their question to one per participant. We have the next question from the line of Pranav Shah from J.P. Morgan. Please go ahead. Hi. Thank you for the presentation. Growth has been very strong and second half is likely to be even better as Mr. Kundu already highlighted. My question was, how are you looking to fund this growth? Will you be looking to move away from bank term loans and rising rates? Related also, at what level of tier one would you look to raise additional capital? Thank you. See, we will continue to be dependent on banks for funding to a large extent. If you look at it, we need a AAA rating to become no more dependent on market borrowings. As long as we are AA+, we will continue to be dependent on banks. Banks have a large appetite for priority sector assets. Most of our businesses, which we do, whether it is Vehicle Finance, LAP, retail, et cetera, that is quite a priority sector condition. We do lot of securitization of assets under the priority sectors angle. We also, you know, depending on market situations, we raise NCDs. We have done in Q1 some amount of NCDs, and we keep looking out for such, you know, opportunities. There is no dearth of funding from banks on this, and we don't see a challenge in this. We will keep evaluating this as we move forward to look at newer avenues of funding. With regard to the capital, we are very clear that until and unless we come to less than 13%, we won't be seeking capital. Right now we are on the Tier 1. The Tier 1 we are comfortable with around 15%+, so we will not be seeking capital immediately. We, if our growth takes us down to the 13% level, then we will certainly request that. Understood. That's very clear. Thank you, sir. I'll get back in the queue. Thank you. Thank you. We have the next question from the line of Shreepal Doshi from Equirus Securities. Please go ahead. Hi, sir. Thank you for giving me the opportunity. I wanted to understand how would the cost of fund move from here, and what are the changes that you're looking on the liability mix side? Because if I look at your debentures share has increased from 10% like five quarters back to almost 18%. What is the thought process about for going for debenture, you know, in increasing debenture share in the liability mix? Yeah. See, the cost of funds, again, as I had mentioned earlier, we are looking at the cost of funds moving almost like 50-60 basis points as compared to the full year of last year. I still hold to that unless something more drastically happens. We have a new MPC meeting tomorrow, so I don't know what shocks or surprises that would get thrown out of that. As of now, our expectation is it should not be more than 50-60 basis points compared to last year. We will try and keep it at that level now. With regard to debentures, you would be aware that there is an RBI norm that 25% of incremental borrowings needs to come through market borrowing. We consciously are capitalizing on whatever, you know, whenever there is a rate benefit out in the market to try and do debentures. We need to fulfill that requirement. Consciously we are increasing that. Each has got its own positive negatives. But at the current level and at our current stage, you know, going into any new change in the approach of the mix, we are not looking at any great change in this. Got it. The second question was with respect to the pricing side. On the non-vehicle finance book, how frequently does the loan book get repriced? I understand that you highlighted that you have been increasing rates in LAP and SME segment, and also the HL segment. Like, how does it get reflected in the customer's account? Does it get repriced once in a year or as and when you increase the rate, it directly gets reflected in the loan account? Yeah, yeah. As and when it gets increased, it will automatically result in the tenor increase or EMI increase depending on how the customer would prefer it. Got it. Just one last question on the Vehicle Finance side. On the growth for that segment, how do you see that in the second half? Like, I understand you highlighted that the growth would be 22%-23%, but if this segment also delivers a healthy growth, how do you what sort of range would you give in that case? See, actually, if you see that the first half number for the commercial vehicle has been 453,000. In the past, during 2018, 2019, we saw industry delivered almost 1 million vehicles sold. We have a cushion to basically grow and whatever number we have seen industry delivered, we can double the number in this second half. Second half is always higher than the first half in the history also. Rabi is actually expected to do better than Kharif because the first half was slightly uneven rain, but second half there will not be any problem. Mining and construction activity also going to improve. Put together commercial vehicle sales will significantly better. That is what the manufacturers are talking about. Passenger car is still selling very high and there is a huge demand actually. The waiting period is at from OEM to OEM is varying from, say, 3 months - 6 months to 1 year. Three-wheeler, two-wheeler also likely to go up. Put together, we are expecting that the industry growth of all vehicle and tractor and construction equipment put together, which is as of now at 31% can be maintained at this level or slightly go up to 35%. Now, this is the unit number growth. Now, if you convert into the value growth, ticket size has gone up because the prices have gone up from BS4 - BS6. To that extent, the value growth will be higher. For us, we have, we can actually either maintain the market share or can look for improving the market share, which will be also a trigger point for higher, having a higher growth. That is what is the number in terms of Vehicle Finance. We are actually in line with that and we are expecting that we will be better than industry in that sense for both unit and value. Got it, sir. Thank you so much, sir, for answering our questions, and good luck for the next quarters. Thank you. Thank you. We have the next question from the line of Ankit Patel from L&T Mutual Fund. Please go ahead. Yeah. Good morning, sir. Congratulations on a good quarter. My question [crosstalk]. Thank you. Was around, yeah, my question was around the asset quality and, the classification you earlier mentioned, on the GS3 and the GNPA numbers. Now, once the RBI circular came in, late end of last calendar year, I think the first quarter that you released, the difference between the two numbers was about 270 basis points and, now that has come down to 200 basis points. Just wanted to understand, so it's been almost a year and, operationally obviously you would be trying to put in place, you know, your systems to try and see that these two numbers come closer. And earlier we were seeing that a trajectory could be more faster, than this. What are your thoughts around how this, you know, could be moving in the future? Do you see any real challenges in actually trying to bring this down? See, the customer profile that we handle this variance will be there. The customers whom we handle cannot move back from stage three to zero delinquency instantaneously. There will always be a time lag between them because they cannot afford to pay two or three installments in one go. To that extent, whenever there is a movement of a customer to stage three and then progressively he moves back, it will take a few, you know, months or quarters to get over and come to the zero delinquency level. The large chunk which we saw was on account of the stage three movement in Q1 last year, which had a larger impact. As we keep moving out that stage three book and, you know, resolving them, we'll see a good amount of traction in the reduction in the variance between the GNPA as per RBI and the stage three as per what the ECL model suggests. To that extent, we'll see some more reduction, but I don't think the variance between these two numbers can be completely eliminated. Just to add, you see, 1B and 2B, which is basically as the stage three at some point in time, they have come back to lower bucket. For such customer, we cannot do anything other than just guiding them or educating them that you are considered as NPA. But till thirtieth September, as per RBI and as per Bureau, they were not considered. From first of October, it is applicable when Bureau also will start flagging them as NPA. I mean, that is happening. That happened. Only there will be some pressure on the customer. Otherwise, customer will say that, you know, "I was actually 90, but it has come down." We cannot put any undue pressure on the customer. We can only just go and say that, you know, "Kindly come out of the flagging of 2B and 1B because you have touched the 90+ at some point in time." During the previous period, there were a lot of good customer went up, and we have to give them adequate time. Maybe after one year when things are actually better. Obviously, every customer who actually has come down from, say, 90+ to 60 and 30, obviously he would like, he or she would like to definitely go down to zero level of delinquency. Okay. Thank you. Thank you. Reminder to all the participants to limit the question to only one per participant. Should you have a follow-up question, please rejoin the queue. We have the next question from the line of Ashwani Kumar Agarwalla from Edelweiss Mutual Fund. Please go ahead. Good morning, sir. If we look at your spreads for the last 3 years-4 years, the spread started increasing post Q2 FY 2021 when we had ample liquidity in the system. Now, interest rate has been normalized, liquidity is being sucked out again. Do we see the NIMs on AUM going back to 6%-6.5% trajectory on a steady state basis? See, the NIM improvement is when cost of funds comes down, that is also a pass-through to the yield. To that extent that this thing happens and when again the cost of funds moves up, we will again progressively increase yield. We spoke about it a few minutes back at the same call. Such cycle happens, but there will be certain amount of time lag between these two happening. To that extent you will see some drop in NIM over next few one or two quarters. Then as the book changes, with regard to the marginal yield catching up with the fixed rate book and with regard to the change in rate on the floating rate book, we'll catch it. We will certainly not let go of the NIM aspect of a certain product. Again, as I said earlier, based on product mix, the NIM will change. For example, if you focus more on two-wheeler, the NIM may look very attractive because the yield is high, but then the OpEx will be high because it is small ticket loan. To some extent, the interest will be high. So, I mean, my request is when we have such a wide product range with differing yield levels, the focus is better to be on the ROTA rather than, you know, the individual line items of NIM, yield NIM, OpEx, et cetera. Okay, thanks. Thank you. Thank you. We have the next question from the line of Abhijit Tibrewal from Motilal Oswal Financial Services. Please go ahead. Good morning and congratulations on a healthy quarter. Sir, my question is for Ravindra Kumar Kundu, sir. Sir, I understand you might have covered it briefly while answering to the first participant. My line had dropped off. In case it's a repetition, please let me know. Just trying to understand, I mean, the competitive landscape that is there today, is it allowing you to take increase in yields on your incremental lending? Or is there a reason to kind of watch out this space in terms of how the competitive landscape evolves and what kind of yield increases we will be able to take on the incremental lending in Vehicle Finance? Okay. We have been successful in increasing the yield of the marginal book, because, you know, we are deeply rooted in small, smaller branches tier two, tier three town, that competition is not there. You know, if the numbers have started growing further in this tier two, tier three towns, which is the reflection of the improvement in rural demand. Obviously, we have been positioned to sustain our growth in terms of marginal book yield. It has been so far as of now. If it is also depending on the product mix. If the heavy commercial vehicle or light commercial vehicle growing faster as compared to small commercial vehicle or tractor, then we need to maintain the market share in each and every product line. Suppose if heavy commercial is growing faster and we maintain our market share, then it also start, you know, impacting on yield. This is depending on the geography, product and the mix of the product. Till now we have been successful, and we are expecting that we will continue to do so at least for this financial year. This is useful, sir. My last question is for Arulselvan, sir. Sir, while we understand that RBI has very clearly said that under the new RBI circular, IRAC norms and Ind AS guidelines will be very, very different. Given that the implementation date of the circular was October first and given that now those loans will have to be tagged as NPA, which they were not required to be done until, let's say, thirtieth September. Under Ind AS, just clarifying, under Ind AS, will there be any change in accounting norms in terms of recognition of interest income or the way you do provisionings? No, the Ind AS works on a loss given default and the probability of default. These are done based on the past, you know, history or past experience of each product line or the sub-product line that we do. We have to take the loss given default of each of the sub-product, and that's how we calculate what is the LGD if a product touches 90. We can also take the same approach we have taken when we did the 1B, 2B also. When the product has 90 and moved back to 60 or anywhere between 30 - 60, how has been the LGD? That's how we have already calculated and put the differential provisioning under ECL also for that 1B and 2B. Now, there is differing views in the industry on how to treat this, should we align stage three to gross NPA itself as per RBI, is a view that the industry will and then the auditors and, the other participants in the industry or maybe the regulators themselves may come up with. Because prior to these guidelines, the view of RBI has been to sort of align stage three and NPA as per the old norms. But here they have categorically mentioned that this, it need not be aligned. However, again, the regulator can take a stance differently. We are keeping our options open with regard to how to account this. Right now, if you look at pure Ind AS, the way we have accounted is what it needs to be done. Understood, sir. Thank you so much. That's all from my side, and wish you and your team the very best. Okay, thank you. Thank you. We have the next question from the line of Umang Shah from Kotak Mahindra AMC. Please go ahead. Yeah. Hi, thanks for taking my question, and congratulations to the team on a good quarter. Just one question on the asset quality front. Now, it might be a little early to call out on the asset quality performance of the new portfolio, but based on your initial experience, how should we look at the steady-state credit cost going forward, given the fact that the share of new businesses will only increase in the overall asset base? Will our asset cost or the credit cost, steady-state credit cost experience be materially different from what we have seen in the past? Just wanted to understand that. See, what we need to look at is each business we need to look at the credit cost in line with that business. This is exactly why I said even in an earlier context with regard to the yield and the NIM part, that the, each business will have a different yield and it will have a different OpEx and different credit cost. Now, the new businesses will certainly turn out a much, much larger yield as compared to the traditional businesses, but their OpEx will be more and their credit cost will be higher. The ultimate game is to get a ROTA which is acceptable to all its stakeholders. That is what we will endeavor to, and that is the whole point of having a diversified mix of products, so we are not getting impacted by one factor on the, in the line. We will work towards that. If you look at it as an independent line item, credit costs may go up as we move up the slightly higher risk book. Our ROTA will be better because these are actually ROTA accretive to the existing businesses, the new businesses. Again, as Kuldeep was saying earlier, we are not going to scale up these businesses like how we have always been doing. In any new product, we will be testing the market, experiencing the product and then scaling them up as we go and get comfortable product by product, customer by customer, geography by geography. That's how we will scale up this business. As we scale up, we will make sure that they give us the ROTA that we endeavor to reach. Okay, thanks for that. Just one data point. What were the write-offs for the quarter? Write-offs. One minute, I can try and dig it out. Write-downs have been in the range of around INR 80-odd crore. Okay, perfect. Yeah. Thank you so much. Those were my questions. Thanks. Thank you. We have the next question from the line of Pranav from Rare Enterprises. Please go ahead. Hi, sir. Thanks a lot for the opportunity. Sir, I just have two questions. One is that I understand that your LGD is much lesser in retail business, but why not just provide for whatever is due after certain days in that business also and take PCR to, say, 60%-70%? That is first. Also, second question is that what kind of precautions or questions the board is asking management where the new lines of business have been growing very fast, and why not let them have some maturity and then take a call before scaling it up to a big level? Thanks a lot, sir. Congrats for the good set of numbers. See, with regard to the first question, it's not, you know, unlike the earlier period, under Ind AS, the way we need to provide is much more, you know, determined by past experience, and we don't have that much independence to simply say that I will add up more provision or I will provide less. It is based on your book performance in the past, so we need to stick to that. Actually, COVID related period, we have kept this management overlay outside this, and that is how we are carrying this extra provision. Even now, you know, right from audit committee et cetera, there have been, you know, questions on how we need to fall in line with Ind AS with regard to the management overlay by itself, which we will work on. I think I spoke about it in the early part of this conversation. Now on the second question, I think the conversation of the board with us, I think that's private. I would not want to Yes. That's right. Yeah. Right. I meant to say that what kind of precautions you are taking, so a prudent way would be just to originate some book and then let it mature over one to one and a half years and then scale it up. Because whatever said and done. We are in line with whatever is the direction of the board and the senior management. We take this and, Yeah. Just to add here, the way we are expanding, if you see that we have been given the count of the branches with respect to each and every business. In the vehicle finance, we have 1,100 branches. As of now in the CSEL business, we are now operational in the less than one-third of the branches. In the home loan also, first we have done a south zone for last seven years, and now only we started, you know, expanding into east, west, north. Within the east, west, north also we identified which are the state, which are the customer segment, what are the type of property. It is not that we are just expanding. We are going by geography, going by the customer segment, going by the product offering. Once we are tested in a particular bigger town, then we go to smaller town. All three new businesses like, you know, CSEL, SBPL and SME, the growth in terms of volumes are looking high because the industry size itself is very big. For example, CSEL industry, our market share as of now is 0.5% because the industry is very large. If you want to do it in, say, one-third of the branches also, this volume will come. If you are going into a town and if you are not addressing all the, you know, if you are going in a traditional way, and if you're not attending all the DSAs, then you will be negligible player in the town. Wherever, whichever town we are going, we are trying to basically reach out to all the lead sources for taking that loan. In terms of the quality, like for example, in CSEL there bounce rate is significantly lower than the industry average. Although it is yet to be matured in terms of the whole portfolio size and book, but we are far ahead in terms of quality. Both quality and type of customer and in terms of growth, we are very cautious and we are moving very slow. Right, sir. Thanks a lot, sir. Thank you. Ladies and gentlemen, that was the last question that the management could answer today. I would now like to hand the conference over to Mr. Nischint Chawathe for closing comments. Thank you everyone for joining us today. We thank the management for providing us an opportunity to host this call. Thank you very much. Nischint? Yeah. Nischint? Arul here. Yeah. Nischint, can you hear me? Yeah. Mr. Vellayan Subbiah wanted to speak on something. No. It's okay. I think, Arun, it's okay. Now we're going to wind it up. Nothing specific. I'm sorry here then. No, no. No problem. Okay. Thank you. Okay. Thank you. Thank you everyone. Thank you. Thank you. Thank you. On behalf of Kotak Securities, that concludes this conference. Thank you for joining us, and you may now disconnect your lines. Thank you.